Cadwalader attorneys examined the "long-awaited" proposal by the Consumer Financial Protection Bureau ("CFPB") of rules governing payday loans and other "high-cost" credit products. The proposal includes a requirement that lenders take steps to ensure prospective borrowers have the ability to repay loans. The proposed rules would apply to physical and online banks, credit unions, and other lenders regardless of how they are licensed under state law. If approved, the attorneys noted, the rules would impose substantial new compliance and recordkeeping obligations on lenders who provide certain kinds of short- and long-term loans to consumers. Given the imminence of that possibility, the attorneys struck a note of caution:
By limiting the numbers of renewals available to consumers – and significantly increasing the compliance burden, reporting and recordkeeping obligations, and costs associated with providing such loans – the proposed rules will have a serious impact on the ability of payday lenders to provide these products to consumers.
Click here to view the Cadwalader memorandum authored by Scott Cammarn, Peter Carey and Joseph Moreno.
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